Commodities
Energy & precious metals – weekly review and outlook
© Reuters.
Investing.com — With just a week symbolically left for the peak of summer driving, most Americans must be relieved that they survived not just the road but also prices at the pump.
Despite fears when the warm season began three months ago that we’ll go back to last summer’s gasoline record of $5 a gallon, Thursday’s weekly round-up of pump prices across the United States showed the national average at $3.82 a gallon, down 5 cents from the year-ago level of $3.87.
The previous week’s average was also $3.87 a gallon, meaning a similar discount week-on-week.
In fact, the retail price of gasoline was only higher when compared with a month ago, when it was about 13 cents more than the late-July average of $3.68.
But it isn’t time yet to wave the checkered flag on gasoline prices because the race isn’t quite over. That’s right: Drivers, don’t take a victory lap now because the American Automobile Association, or AAA, warns that prices could still spike in the near future as the North Atlantic storm season gets more intense over the Gulf Coast of Mexico where the backbone of oil production, refining and piping is located.
“Although the national average did a U-turn this week, the road ahead could lead to higher prices,” AAA spokesperson Andrew Gross wrote on a blog posted on the association’s website on Thursday. “Ongoing concerns regarding potential storm activity could hinder falling pump prices this fall.”
Despite growing demand for gasoline, the decline in the U.S. crude price from an early August high of almost $85 per barrel to below $80 now has managed to keep a lid on gasoline at the pump as well, Gross noted.
But that could change soon with the approach of the Sept. 4 Labor Day holiday, which unofficially marks the end of summer road trips in the United States.
“Gas demand and volatile oil prices, particularly during an active hurricane season, could limit how much lower prices descend in the weeks ahead,” AAA said on its website.
The National Oceanic and Atmospheric Administration, or NOAA, which flags all major weather changes in the United States, said what was initially known as Tropical Storm Franklin has strengthened into a Category 1 hurricane in the Atlantic — becoming the first major for this season. Franklin could gain further intensity by Sunday though its track is expected to largely avoid energy installations in the U.S. Gulf.
“While Hurricane Franklin is not expected to hit the U.S. mainland, big swells are expected to impact the Eastern Seaboard starting as early as Monday and lingering through Labor Day weekend,” the NOAA said.
It said Tropical Depression Ten was expected to bring gusty winds to Northeastern Mexico and “likely to become a hurricane over the Eastern Gulf of Mexico in a few days”.
Another wind system called Tropical Depression Ten-E was developing but is “expected to be no threat to land”, the NOAA said.
Although the 2022 season was destructive and deadly, its impact on the offshore oil industry – specifically offshore workers – was relatively mild in comparison to previous years.
A total of 17 hurricanes were recorded during the 2022 season, with three of them – Ian, Nicole and Fiona – bringing extensive damage to Florida’s coast and to Puerto Rico.
Ian was the sole storm of the 2022 Atlantic hurricane season to significantly disrupt offshore oil production in the Gulf of Mexico. About 11% of production in the Gulf was shut-in by September 27 in preparation for the storm, which hit the area as a category 4 hurricane.
Oil companies evacuated personnel from 14 platforms and rigs in anticipation of the storm, and approximately 190,000 barrels of oil per day in production were lost as a result of the disruption.
Tankers and vessels also cleared the eastern region of the Gulf of Mexico.
These measures meant that, although production was affected, no crew members were reported lost or injured as a result of Hurricane Ian or any other named storm in 2022.
This is a far cry from 2021, when the crew of the Noble-owned and Shell-leased drillship, Globetrotter II, was left to weather Hurricane Ida. Her crew of 142 were tossed about, believing they were going to capsize and sink, as 150-mph winds and 80-foot waves battered the vessel. The Coast Guard was able to rescue all of the crew members, but not before they suffered significant mental and physical trauma.
In 2020, Hurricane Zeta nearly claimed another rig, Transocean’s Deepwater Asgard.
For the record, hurricanes haven’t left too much of a toll on the U.S. oil industry over the past three years. With Mother Nature’s will, this year won’t be an exception.
Oil: Market Settlements and Activity
Crude prices rose for a second day in a row on Friday. But the gains weren’t enough to offset losses from earlier in the week. That left the market in the red for a second consecutive week amid signs the Federal Reserve wasn’t done with yet to bring U.S. inflation under control.
New York-traded , or WTI, crude did a final trade of $80.05 per barrel after officially settling Friday’s trade at $79.83 – up 78 cents, or 1%.
Despite the rebound on the day, the U.S. crude benchmark finished the week down 1.7%, after shedding 2.3% last week. Prior to that, it rose for seven straight weeks in a rally that lifted WTI by nearly 20%.
London-traded did a final trade of $84.88 after officially settling Friday’s session at $84.48 – up $1.12, or 1.3%.
Compared with WTI, Brent’s current week loss was far more modest at just 0.4%, adding to the previous week’s 2.3% drop. Before that, the global crude benchmark also rose for seven weeks in a row, rising by a total of 18%.
Oil: WTI Technical Outlook
With U.S. job numbers for August landing on the coming Friday, this week could see additional volatility in oil as macroeconomic concerns cloud a market already facing uncertainty from weak Chinese demand and the fading of the initial bull fervor over Saudi and Russian production cuts.
Technically, the bearish momentum in WTI continued for a second straight week, to below the daily Middle Bollinger Band of $81.30, while the 50-day EMA, or Exponential Moving Average, provided support at $78, noted Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
For the coming week, a break below the horizontal support base of $77.60 increases the chance for WTI’s further decline to the 200-day SMA of $75.90. This support will be closely followed by the 100-day SMA of $75.20, which tends to distance WTI away the from 200-day SMA.
For the upside, WTI would have to reclaim the daily Middle Bollinger Band of $81.30, with a day closing above that mark, Dixit said, adding that this would then extend towards the previous week’s high of $82.50.
Above this, $83.20 would be a minor hurdle before the critical barriers in the form of the 100-week SMA, or Simple Moving Average, of $85.75 and the monthly middle Bollinger Band of $86.75
“In summary, short-term resistance for the week may be at $81.25, while support is seen at $78.25,” Dixit added.
Gold: Market Settlements and Activity
For a second week in a row, gold saw anemic activity as market participants took in their strides the Fed’s caution that it will likely resort to more rate hikes to get U.S. inflation back down to 2% per annum from the current 3%.
Gold futures’ most-active on New York’s Comex did a final trade of $1,943.30 per ounce after officially settling Friday’s session at $1,939.990 – down $7.20, or 0.4%
, which tracks real-time physical dealings in bullion and is more closely followed than futures by some gold traders, settled at $1,914.60, down $2.12 or 0.1%.
Gold: Bullion Technical Outlook
A break below $1,908 will force spot gold to retest the $1,900 support, under which immediate support stands at $1,885, said SKCharting’s Dixit.
“For now, the major downside potential for spot gold is seen at $1,850,” he said.
On the flip side, clearing through the $1,930 barrier will extend gold’s upward move towards the next leg higher, which is the descending weekly Middle Bollinger Band of $1,950, Dixit said.
“This zone can act as a turning point for spot gold,” he added.
Natural gas: Market Settlements and Activity
The gas contract on the New York Mercantile Exchange’s Henry Hub did a final trade of $2.552 per mmBtu, million metric British thermal units, after officially settling Friday’s session at $2.657, up 2.1 cents on the day or 0.8%.
For the week, the October gas contract slid by 0.4%.
Natural gas had an uneventful week despite of the commodity growing by just 18 billion cubic feet, or bcf, last week versus a forecast 33 bcf and a previous weekly build of 35 bcf. Analysts said concerns about approaching fall weather and gas inventories stubbornly remaining at 20% above year-ago levels had prevented the market from rallying.
Natural gas: Price Outlook
The sideways action in natural gas is supported by stability at above $2.47, which is a horizontal support base formed by long consolidation above the 100-day SMA that’s closely aligned with the weekly Middle Bollinger Band, said Dixit of SKCharting.
“As it stands, the daily 50 EMA of $2.60, followed by the daily Middle Bollinger Band of $2.64, are immediate resistance zones,” said Dixit. “If these levels are breached, major resistance will shift to the 200-day SMA, dynamically positioned at $3.10.”
Disclaimer: Barani Krishnan does not hold positions in the commodities and securities he writes about.
By Anna Hirtenstein
LONDON (Reuters) -Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.
futures gained $2.66, or 3.5%, to $79.58 a barrel by 1154 GMT, reaching their highest in more than three months. U.S. West Texas Intermediate crude futures advanced $2.64, or 3.6%, to $76.56.
Over the three weeks to Jan. 10, Brent has climbed 9% while WTI has jumped 10%.
“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the U.S., driving up demand for fuels.”
Ahead of U.S. President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.
This could materialise even earlier, with U.S. President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil and shipping industry.
“That would be the farewell gift of the Biden administration,” said PVM analyst Tamas Varga. Existing and possible further sanctions, as well as market expectations of draws on fuel inventories because of the cold weather, are driving prices higher, he added.
The U.S. weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for , kerosene and LPG,” they said in a note on Friday.
Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.
Inflation worries are also delivering a boost to prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.
Oil prices have rallied despite the U.S. dollar strengthening for six straight weeks, making crude oil more expensive outside the United States.
By Karen Braun
NAPERVILLE, Illinois (Reuters) -If anything can derail a price rally, it is a curveball from the U.S. Department of Agriculture.
Chicago corn futures have ticked slightly lower to start the year, but they had climbed nearly 12% in the final two months of 2024, an unusually strong late-year run.
Speculators now hold their most bullish corn view in two years, and luckily for them, the trade has already accepted that last year’s U.S. corn yield was a whopper.
Friday will feature USDA’s biggest data release of the year, with primary focus on the most recent U.S. corn and soybean harvests. U.S. quarterly stocks, U.S. winter wheat seedings and routine global supply and demand updates will also compete for attention.
U.S. CORN AND BEANS
On average, analysts peg U.S. corn yield at 182.7 bushels per acre, down from 183.1 in November. The trade estimate is more than 5 bushels above last year’s record and above USDA’s initial trendline yield for the first time in six years.
Bearish yield outcomes are less likely when the estimates are already large, and only four of 19 polled analysts see corn yield rising from November. However, the range of trade estimates (2.4 bpa) is smaller than usual, flagging the potential for surprise.
In the last decade, analysts anticipated the wrong direction of U.S. corn yield in January only once (2019). They did so three times for soybean yield (2016, 2019, 2022).
But bets are somewhat off for U.S. soybean yield outcomes because USDA’s slashing of the forecast in November was the month’s largest cut in 31 years. Trade estimates indicate some uncertainty around U.S. soybean production as the ranges for both yield and harvested area are historically wide.
Regardless, U.S. soybean supplies are expected to remain ample and at multi-year highs. However, USDA last month pegged 2024-25 U.S. corn ending stocks below the prior year’s level for the first time.
If USDA cuts U.S. corn ending stocks on Friday as expected, it would be the agency’s seventh consecutive monthly reduction. Such a streak has not been observed in at least two decades, reflective of the strong demand that has recently lifted corn prices.
From a market reaction standpoint, these demand dynamics could be somewhat insulating if the U.S. corn crop comes in larger than expected. The last two times CBOT corn had a distinctly negative reaction on January report day were 2012 and 2024, the latter sparked by a huge yield above all trade estimates.
U.S. WHEAT
USDA will not officially issue 2025-26 outlooks until May, but the wheat market will receive its first piece of 2025-26 U.S. crop intel on Friday with the winter wheat planting survey. Total (EPA:) U.S. winter wheat acres are pegged at 33.37 million, very close to both last year and the five-year average.
Analysts have had a rough time anticipating the planting survey in the last two years, coming in almost 1.4 million acres too high last year but lowballing by nearly 2.5 million acres in 2023.
Wheat traders have struggled to find viable bullish narratives despite wheat stocks among major exporters seen dropping to 17-year lows, so another big miss in the U.S. wheat acreage could either support or undermine the recent sentiment.
SOUTH AMERICA
The U.S. crops will probably dominate the headlines on Friday, but it is not too early to watch out for forecast changes in South America. Analysts see USDA upping Brazil’s 2024-25 soybean harvest to a record 170.28 million metric tons from the previous 169 million.
USDA has increased Brazil’s soy crop in three of the last eight Januarys, both on area and yield improvements, and many industry participants have already been factoring in a number north of 170 million tons.
For Argentina, there are already fears that ongoing dry weather could eventually warrant more significant cuts to soybean and corn crops than are anticipated for Friday. American and European weather model runs on Thursday remained stingy with the rainfall over the next two weeks.
USDA already hiked Argentina’s soybean output last month on higher area. The agency increased the crop last January but reduced it in the prior three Januarys. Current crop conditions are slightly worse than a year ago but better than in the prior three years.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
Investing.com– Oil prices steadied Thursday as traders digested data showing an unexpected increase in US product inventories, while weak economic data from top importer China weighed.
At 05:25 ET (10:25 GMT), expiring in March gained 0.1% to $76.25 a barrel, while rose 0.1% to $73.37 a barrel.
The crude benchmarks had slumped more than 1% on Wednesday, but trading ranges, and volumes, are likely to be limited throughout Thursday with the US market closed to honor former President Jimmy Carter, ahead of a state funeral later in the session.
China inflation muted in December
Chinese inflation, as measured by the , remained unchanged in December, while the shrank for a 27th consecutive month, data showed on Thursday.
The reading pointed to limited improvement in China’s prolonged disinflationary trend, even as the government doled out its most aggressive round of stimulus measures yet through late-2024.
China is the world’s biggest oil importer, and has been a key source of anxiety for crude markets. Traders fear that weak economic growth in the country will eat into oil demand.
The country is also facing potential economic headwinds from the incoming Donald Trump administration in the US, as Trump has vowed to impose steep trade tariffs on Beijing.
US oil product inventories rise sharply
U.S. gasoline and distillate inventories grew substantially more than expected in the week to January 3, government data showed on Wednesday.
inventories grew 6.3 million barrels against expectations of 0.5 mb, while grew 6.1 mb on expectations of 0.5 mb.
Overall crude also shrank less than expected, at 0.96 mb, against expectations of 1.8 mb.
The build in product inventories marked an eighth straight week of outsized product builds, and spurred concerns that demand in the world’s biggest fuel consumer was cooling.
While cold weather in the country spurred some demand for heating, it also disrupted holiday travel in several areas.
EIA data also showed that US imports from Canada rose last week to the highest on record, ahead of incoming U.S. president Donald Trump’s plans to levy a 25% tariff on Canadian imports.
Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023.
Strength in the also weighed on crude prices, as the greenback shot back up to more than two-year highs on hawkish signals from the Federal Reserve.
A strong dollar pressures oil demand by making crude more expensive for international buyers.
(Ambar Warrick contributed to this article.)
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